Churches Across America Either Floored by Foreclosures or Mauled by Financial Crisis
Churches across America have either been floored by foreclosures or mauled by the financial crisis. It is the individual churches that have been most affected, however. The congregation numbers have fallen along with subscriptions.
The Family Christian Center, which is under the direction of pastors Rich and Lindy Oliver, decided that more space was required for their growing congregation. The church took a loan of $4.2 million to achieve that. But when the crisis hit in 2006, many of the faithful shifted to other places while those that remained reduced their contributions drastically. Meanwhile, the value of the property tumbled down in 2008 from $8.5 million to a mere $2.5 million.
The pastors had no alternative but to cease from paying mortgage dues. Oliver said, “I just told the bank to take it. If you’re a church with a piece of property upside down and no one will refinance the loan or lend you more money, there’s not really another choice but to walk away”.
Understandably, banks are hesitant to “foreclose on God” and try to seek alternatives but, so far, no such deal has materialized in the case of the Olivers. The church, newly named The Family Church, is doing what others are in the rest of the country – “cutting back and simplifying”. Last November, the pastors were able to raise $700,000 but it was not sufficient to bail out the previous Family Christian Church. The money came from personal loans and donations from the members of the church.
Generally, the lenders thought the churches to be safe as borrowers because of the regular flow of cash coming from tithing and the moral feelings of the majority of the pastors to be particular about repaying debts.
Similar to other churches, Oliver made use of bond-financing and not direct mortgages to fund the constructions. Traditionally, those churches that wanted to construct turned to the governing bodies or to niche lenders from where they got long term loans. But during the housing boom, the local and community banks tempted the churches with low interests and short-term loans.
Simultaneously, the underwriters of bonds started to offer churches more money upfront if churches issued compound-interest-bonds. That means that, until maturity, the churches didn’t to pay anything; at the time of reckoning, they would have to pay both principal and accumulated interest. In the next coming few years, these bonds will mature – resulting in more trouble for churches.
Summing up the situation, however,pastor Johnny Zapara said, “A building does not make a church. We will find a way to continue”.